After a Thunderous Start to Year for Investors, Big Indicators Now Flash Red

Respect the surprise reversal in stock markets on Wednesday, there just may be too much bullishness on Wall Street right now.

Markets have gotten off to a hot start so far in 2018 thanks to optimism on tax reform from the Trump administration. The Dow Jones Industrial Average and Nasdaq Composite have notched respective gains of 6% and 10%. Buyer beware moving forward.

"Our CTI [critical time intervention] models show the S&P 500 as overbought, the weekly RSI [relative strength index] is at a post war high and it is now the longest on record without a 5% pullback," writes Bank of America strategist James Barty. "Treasuries are at their most oversold since the aftermath of the presidential election, oil has had the biggest risk adjusted return in a decade and equity internals look stretched with cyclicals overbought and defensives oversold."

Reminds Barty, "Markets don't usually go up in a straight line."

Fourth quarter earnings season has served up reasons for the bulls to reassess their optimism.

United Airlines (UAL) has ignited a possible fare war among the major carriers, which are beginning to feel the impact of higher oil prices. And Procter & Gamble (PG) , Kimberly-Clark (KMB) and other consumer-products companies are calling out surging inflation in oil-based commodities and within the trucking space.